India: Another intervention to hold steel prices ruled out

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28 Jun 2008

Even as the steel sector has been a major contributor to the galloping inflation based on the wholesale price index (WPI), Steel Minister Ram Vilas Paswan ruled out the likelihood of yet another intervention asking major producers to hold prices when global steel prices are on the rise. Asked if the government would ask the major steel producers to hold prices for some more time beyond the three months agreed to, Mr. Paswan said: “[The] government cannot intervene every time as steel rates are governed by international prices.”
Following a meeting with Prime Minister Manmohan Singh in May this year, the country’s integrated steel makers had slashed prices of flat steel products by Rs.4,000 a tonne and that of reinforcement bars and structurals by Rs.2,000 a tonne. Endorsing the government’s concern that steel prices were adding to the inflationary pressures on the economy, the steel majors had also promised to hold prices for a three-month period till July.
However, with a renewed surge in the prices of raw materials, especially iron ore and coking coal, the steel producers have indicated the possibility of steel prices going up from August. Mr. Paswan admitted that the prices of iron ore and coking coal had seen a significant spurt in the global market over a one-year period which resulted in a squeeze on the margins of domestic steel producers.
Speaking on the sidelines of a seminar organised by the MSTC (formerly Metal Scrap Trade Corporation), Mr. Paswan pointed out that while the government would not like to see the steel industry closing down owing to low margins, it would certainly keep a close watch on the industry to monitor whether steel prices were being hiked in keeping with the rise in raw material costs.
“The government has no problem as long as steel producers raised prices in proportion to hike in input costs.”
Steel prices have surged by about 50 per cent since January this year.

Source: The Hindu